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Economic and social policies under EMU

Author

Listed:
  • Ricardo Pinheiro Alves

    (Universidade Lusíada and Research Office of the Portuguese Ministry of the Economy)

Abstract

The coordination of economic policies is seen as a requirement of EMU, although there is no strong economic rationale for it. After the 2008-2010 crises a complex surveillance mechanism was implemented where the European Semester had the role to coordinate economic and social policies in order to obtain real convergence between countries and prevent further instability. However, it has been ineffective in helping Southern countries to converge, deepening existing divisions and threatening further exits after the UK. This ineffectiveness and a democratically flawed decision-making process ask for a change in the framework of policy coordination. The proposed solution mixes an idle approach based on fiscal transfers with an engaged one where coordination over significant spillover effects between countries and cooperation based on Pareto improvements are the rules. It reinvigorates the governance of the single market, focuses on the spatial distribution of economic activity and it is a decentralized answer to the common threat of division. Moreover, it complies with the two core ideas of the EU project: democracy, from which peace depends, and development within a market economy where countries are free to choose their way of development.

Suggested Citation

  • Ricardo Pinheiro Alves, 2020. "Economic and social policies under EMU," GEE Papers 0156, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Aug 2020.
  • Handle: RePEc:mde:wpaper:0156
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    File URL: http://www.gee.gov.pt//RePEc/WorkingPapers/GEE_PAPERS_156.pdf
    File Function: First version, 2020
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